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January 10, 2005

Health Insurance Executives Operate in a Business Performance Vacuum, According to META Group

Recently completed interviews with health insurance industry executives bring a startling realization: most operate in a comparative business performance vacuum. According to the Managed Care Performance Benchmark Survey conducted by META Group, a leading provider of information technology (IT) research, advisory services, and strategic consulting, the insurance sector lags behind other industries in its use of business operation metrics as tools to measure industry and company performance. Analysts warn that without such measures it is nearly impossible to operate efficiently or draw meaningful comparisons from one company to another.

"As it stands now, insurance executives have no way of demonstrating relative growth or proving that they surpass their competition in basic operational execution," says Robert H. Booz, vice president of Insurance Information Strategies at META Group. "We believe the insurance industry is in critical need of business performance measure tools, and for that reason, we at META Group plan to play a major role in helping the industry develop and adopt meaningful metrics."

In addition to the survey findings which indicated a lack of industry benchmark abilities, supplemental research also revealed surprising information about the effectiveness, reach, and growth potential of the health insurance industry at large. Among the most startling information was the drop in the portion of the population covered by private health insurance (from 75.5% in 1987 to 68.6% in 2003). Consistent with that finding, total covered life grew by a miniscule 0.52% compound annual growth rate (CAGR) during this 16-year period.

"This research reveals that insurance membership growth is clearly not the key to unlocking industry profitability," continued Booz. "Indeed, the lack of such growth is precisely what makes pricing and effective cost management imperative to bottom-line improvements. Without crisp and focused measures, the industry is just guessing."

Information collected through the Managed Care Performance Benchmark Survey will be used in the development of recommendations for industry guidelines and metrics. META Group encourages health insurance industry executives and companies to participate in the survey, which is designed to capture self-reported managed care metrics. Interested parties can locate and participate in the survey online at the following link: http://www.metagroup.com/mgsurveys/2040.htm.

About the Managed Care Performance Benchmark Survey

META Group has developed an online survey tool to capture self-reported managed care metrics. This survey is targeting data available from participating organizations representing 2004 performance to date.

Since the information requested is generally consistent over time, it will not be necessary to have an entire year's worth of data to respond with meaningful results. To show our appreciation of the responding organizations' time and effort, all participants will receive a copy of summary results from the study with blinded company names. The results of the survey are planned to be available by mid-March. Individual company data will remain confidential. All data will be reported in aggregate.

Posted by Tom Troceen